And despite the initial shell shock of that news, most employees in Redmond are happy with their new CEO Satya Nadella and the way things are going, a source close to the company tells Business Insider.

Our source says that within hours of the news, the company was "back to business as usual."

This is just one source, so it's impossible to generalize for a company of thousands. However, it was an insightful take on the situation, and the sentiment is backed up by job-hunting site Glassdoor. It says Nadella still enjoys an 87% employee approval rating.

No One Surprised By Nokia Cuts

As we previously reported, the layoff hit newly acquired Nokia employees the hardest. Of the 18,000 cut, 12,500 were from Nokia.

Most Microsoft employees understood why, our source said. Microsoft had no interest in building feature phones, so it trimmed all the people working on feature phones, about half the company.

Even so, our source believes that Microsoft had no choice but to buy Nokia. It was the only phone manufacturer building high-quality Windows phones and in a post-PC world, it had Microsoft in a headlock. If Nokia turned its focus to Android, as it had begun to do, Microsoft would be stuffed.

Cutting Bureaucracy

Another 5,500 employees are being cut from Microsoft, with most of the layoffs, 13,000, done on day 1. The rest will occur over the next six months, the company said.

Inside Microsoft, test engineers across the company, particularly in the Windows unit, were the hardest hit, our source said. Nadella had already reorganized the units he ran before, cloud and Server and Tools.

Nadella is not mandating the cuts or the organizational structure of each unit, another source tells us. In fact, that's one of the changes to the culture that he's implmenting. Every unit may be structured a little differently. The cloud unit, which pushes out new software daily, may not need the same structure as, say, the Windows unit.

Still, the layoff undoes the organizational system favored by Steven Sinofsky, multiple sources tell us, who helped spread a single structure across the company.

Previously, employees were aligned in three disciplines: Program Manager (the person who decides features, writes specifications), Developer (creates the features), and Tester (makes sure developer properly created features).

Under Sinofsky those units were independent, reporting up to their own managers all the way to "the highest possible level," our source says, typically the executive vice president.

And that meant that all decisions about a product were made by "triads of dev, test, pm." If something needed higher approval, it went up to the next triad. It didn't get to a single decision-maker until the EVP level. It was management by committee on steroids, a very slow way to build products.

Now, the testing job is part of the development team similar to how other big software companies do things. Dedicated testers are directed toward big things, like testing a whole product or cloud service, instead of testing each individual feature. That means the company needs fewer testers and even fewer managers of testers.

It's also a change in philosophy for Microsoft, our source says. Microsoft pioneered the idea of career test engineer.

Outside Windows, program managers are being hit, too. "Some organizations had too many program managers and too many managers of program managers," our source said.

Besides the test engineers, some international teams in China and India in the Windows unit were heavily targeted for layoffs, too. This wasn't political but practical, our source said. The team wanted to streamline things and not work across every time zone on the planet.

Windows Phone Folks Have Key Role

ScreenshotJoe Belfiore

But the Windows unit is not being gutted, far from it. The team is focused on the next version of Windows, code-named Threshold, which might be called Windows 9.

The team believes that Threshold will "solve all the problems with Windows 8" and do touch especially well. That's in part because Joe Belfiore and the Windows Phone group is leading key pieces of the design on Threshold, reporting up to Terry Myerson.

Meanwhile, the touch version of Office, which Microsoft has not yet shipped for Windows 8, is being designed for Threshold, our source says.